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What Is A Conversion Mortgage

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What is a Home Equity Conversion Mortgage? Is it right for you?

The user experience of the page you want users to convert has a noticeable impact on the conversion rate. If your forms arent intuitive and if users have to spend too much time thinking about what to do next, theyre likely going to feel frustrated and bounce, rather than convert. User experience also encompasses technical considerations. If your website is loading too slow, your users will leave before theyve even seen all the content. Alexas SEO Audit can help you swiftly identify technical SEO problems that may provide a poor user experience and inhibit conversions.

What Are The Benefits Of The Convertible Mortgage

There are many benefits to this program, but the most obvious is the ability to lock in a lower interest rate than you received when you purchased the home. The program began in 1983 when interest rates were very high. At that point, home ownership was very expensive and the housing market suffered. With the Convertible Loan option, homebuyers had the opportunity to lock in a lower interest rate when rates fell.

With the option to convert your interest rate, you have the opportunity to save a great deal of money because you do not have to refinance. Typically, if you have an ARM, you have to refinance into a fixed rate loan if rates get too high or you wish to have more stability. This means that you have to pay closing costs as well as qualify for the new mortgage. You have to provide:

  • Income documents

If one of these factors renders you ineligible for the new loan, you are stuck with the ARM. The convertible program does not require you to refinance you automatically qualify for the lower rate as long as you secure it during the designated period. There are no qualifying factors preventing you from taking advantage of the lower interest rate!

Who Is Eligible For A Home Equity Conversion Mortgagehecm

The Federal Housing Administration sponsors the home equity conversion mortgage and provides insurance on the products. The FHA also sets the guidelines and eligibility for these loans. Borrowers can only obtain HECMs from banks where the FHA sponsors the product. To obtain a home equity conversion mortgage a borrower must complete a standard application.

To obtain approval a borrower must meet all of the requirements set by the FHA. They must:

  • Be 62 years of age or older
  • Own the property outright or paid-down a considerable amount
  • Occupy the property as your principal residence
  • Not be delinquent on any federal debt
  • Have financial resources to continue to make timely payment of ongoing property charges such as property taxes, insurance, homeowner association fees, etc.
  • Participate in a consumer information session given by a Housing and Urban Development-approved HECM counselor

Mortgage lending discrimination is illegal. If you think you’ve been discriminated against based on race, religion, sex, marital status, use of public assistance, national origin, disability, or age, there are steps you can take. One such step is to file a report to the Consumer Financial Protection Bureau or with the U.S. Department of Housing and Urban Development .

In addition, the property must be one of the following:

  • Single-family home or two- to four-unit home with one unit occupied by the borrower
  • HUD-approved condominium project

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How To Apply For A Home Equity Conversion Mortgage

You can search online for a HECM lender on HUDs website or inquire with your bank or credit union to see if they are a HECM-approved lender. The application process is straightforward and can take about the same time as a traditional forward mortgage.

Your lender will ask for various income and asset documents, such as tax returns, pensions, Social Security statements, and bank statements. They will also check your credit. Youll also be set up with a mandatory counseling session with a HUD-approved counselor, and your home will be appraised.

Your lender will likely discuss any fees you will pay or have rolled into your loan at closing. These can include origination and servicing fees from your lender , as well as fees to a third party for a title search, appraisal, or inspection.

What Is A Conversion Option In A Mortgage

What Is A HECM Loan? (Home Equity Conversion Mortgage)

Conversion option refers to a clause that has to do with adjustable-rate mortgages that enable an individual to change the adjustable-rate mortgage to fixed rates at a certain future date. Mortgage loans that have conversion options come at a cost, as its rates are typically higher than those without a conversion option. The conversion option also applies to preferred stock and bond issues. It allows its holder to change the shares into common stock.


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How Does It Work

A HECM allows you to convert a portion of the equity in your home into cash. You will continue to live in your home, retain ownership and will not be required to make any monthly mortgage payments during the loan period. However, unlike a traditional home equity loan or second mortgage, you do not have to repay the HECM loan until you no longer use the home as your principal residence or fail to meet the obligations of the mortgage. You will be required to pay for property taxes, home insurance and home maintenance.

Why A Conversion Option Has Higher Fees

To convert to the fixed-rate, you first have to pay a fee. Also, the ARM conversion from the fixed rate is based on the market rate and at a given percentage at conversion time. If the estimation of the future refinancing costs happens to be less than the overall conversion options costs, then the conversion option is uneconomical. In this case, it will be prudent for the borrower to use a traditional adjustable-rate mortgage to make a fixed interest rate refinancing at a future date.

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What Is A Reverse Mortgage And How Does It Work

Instead of the homeowner making payments to the lender, the lender pays payments to the homeowner with a reverse mortgage. The homeowner has the option of receiving these payments in a variety of ways and only pays interest on the amount received. Because the interest is rolled into the loan total, the homeowner does not have to pay anything up front. The homeowner also retains ownership of the property. Over the course of the loan, the homeowner’s debt grows and his or her equity shrinks.

A reverse mortgage, like a forward mortgage, is secured by the home. The profits from the sale of the home go to the lender to repay the reverse mortgage’s principle, interest, mortgage insurance, and fees when the homeowner moves or dies. Any earnings from the sale that exceed the amount borrowed go to the homeowner or the homeowner’s estate . In some circumstances, the heirs may elect to pay down the mortgage and keep the house.

Whats A Reverse Mortgage

How do I qualify for a Home Equity Conversion Mortgage (HECM)?

A reverse mortgage is a financial agreement where a homeowner relinquishes equity in their home in exchange for routine payments. These types of loans are typically made to supplement retirement income and should not be a sole means of income for the applicant. Traditionally, these loans are backed by the Federal Housing Administration and offer more consumer protections, making them popular in Florida. Unlike a traditional mortgage, with a reverse mortgage, the lender pays you rather than you paying the lender. Whats more, theres no repayment obligation until all of your home equity is gone or you no longer live in the property.

Another characteristic of reverse mortgages are the interest rates, which are typically lower and have less requirements than with a traditional mortgage. However, the closing costs are substantially higher than a standard mortgage.

Here are some things to know about reverse mortgages before deciding if this is something that would work for you.

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Benefits Of A Reverse Mortgage: Ownership Does Not Change

It is a common misconception that with a reverse mortgage, you are giving up ownership of the home, but that is not true. Reverse Mortgages can benefit seniors by providing them with additional funds through their home while they are still living in it. You still own the house unless you or your heirs decide to sell it.

What Is A Convertible Mortgage

November 15, 2016 By JMcHood

The Convertible Mortgage is one of the many options available to you, helping you to make home ownership as affordable as possible. This mortgage product gives you the best of both worlds an adjustable rate in the beginning of the term with the option to convert to a fixed rate in the future.

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What Is The Hecm Reverse Mortgage

HECM stands for Home Equity Conversion Mortgage, and its pronounced heck-em. This reverse mortgage is government-backed and supervised by the Federal Housing Administration .

Its also sometimes called the FHA reverse mortgage.

Reverse mortgages get their name because borrowers dont make payments to lenders. Instead, lenders make payments to borrowers. The loan is repaid when the homeowner sells the property or leaves it to heirs.

The maximum loan amount depends on the borrowers age, the amount of equity in the home and current interest rates. The money can be used for any purpose, such as paying down debt, home repairs, medical costs or just improving your lifestyle.

You can choose to receive monthly payments, a lump sum of cash or line of credit. The loans interest is added to its balance, so you dont have to make payments.

When the home is sold, the loan is repaid, and the rest of the sale proceeds are paid to the homeowner or heirs.

Home Equity Conversion Mortgages

2020 What is a Home Equity Conversion Mortgage (HECM) Loan ...

HECMs are backed by the U.S. Department of Housing and Urban Development and are federally insured. There are a few advantages to HECMs: there isnt a firm income requirement, and unlike single-purpose mortgages, they can be used for any reason. However, they tend to be pricier than old-fashioned home equity loans in terms of both total costs and upfront fees.

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What Is Home Equity Conversion Mortgages

The Home Equity Conversion Mortgage is the Federal Housing Administrations reverse mortgage program which enables you to withdraw some of the equity in your home. You choose how you want to withdraw your funds, whether in a fixed monthly amount or a line of credit, or a combination of both.

You can also use a HECM to purchase a primary residence if you are able to use cash on hand to pay the difference between the HECM proceeds and the sales price plus closing costs for the property you are purchasing.

Landing Page Conversion Rates By Industry

So far, weve covered average conversion rates for e-commerce and across different ad providers. Now well take a look and landing page conversion rates by industry.

By focusing on average conversion rates for just landing pages, we get a more accurate picture of how real marketers are doing because landing pages are usually optimized for one action and one action only: the conversion. Unbounce, an established marketing publication and landing page service, conducted research to identify conversion rates of landing pages by industry.

In another report, Unbounce studied 74.5 million visits to 64,000 lead generation landing pages using the Unbounce product.

As you can see from the image above, industry conversion rates can vary dramatically for landing pages. The median conversion rate from both reports hover between 3-5.5%, so thats what Id use as an average conversion rate here. That said, Id recommend focusing on the number for your industry to get a more realistic baseline.

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What Exactly Happensin A Conversion

A conversion essentially changes the nature of the transaction from a rent-on-money transaction to a rent-on-property transaction. There is a loophole in all mortgage transactions that we take advantage of, as long as we do not change the economics of the transaction, we can change the nature of how profit is earned.

How Much Can I Borrow With A Reverse Mortgage

Are Home Equity Conversion Mortgage – HECM Intrest Rates Competitive?

The amount you can borrow depends on the value of your home, your age and the interest rate on the reverse mortgage. Older couples, borrowers with lower interest rates and borrowers with higher home values can borrow more.

For example, a 62-year-old couple with a $500,000 home can borrow up to $228,500 on a 7% loan. An 82-year-old couple with a $250,000 home can borrow up to $175,00 on a 7% loan. If borrowers are not the same age, the age of the youngest borrower is used to determine loan limits.

The maximum you can borrow is $726,525 .

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Hecm Reverse Loan Requirements

Before applying for a HECM, you are required to attend a consumer information session with a HECM counselor approved by the Department of Housing and Urban Development .

You must be at least 62 years old, and you need to own the property free and clear, or have a mortgage balance small enough to be cleared by the reverse loan proceeds.

There is no minimum income or requirement to get a HECM, but the lender must evaluate your ability to pay your property taxes, insurance and property maintenance.

If you dont pass the evaluation, some of your proceeds will be held back by the lender, and it will pay your taxes and insurance for you.

How To Calculate Conversion Rate

A conversion is defined as either a sale or submission of information, which a tracking pixel can track. In B2B online marketing, a conversion is usually defined as obtaining a leads information rather than a sale. A sale can take months or years to close given the large scope of a product or service offered.

Calculating the conversion rate is as simple as dividing the total number of conversions for a page by the total number of visitors to that page and multiplying by 100 to get a percentage. The conversion rate will tell you what percent of the visitors actually converted.

Conversion rate % = x 100

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Who Is Eligible For A Hecm

In order to qualify for a reverse mortgage, a borrower must meet certain eligibility criteria. These include:

  • Borrowers must be at least 62 years old.
  • Borrowers must own substantial equity in their home.
  • Borrowers are required to live in the property as their primary residence.
  • Before borrowing, you must attend a HUD-approved counseling session.
  • Maintain FHA property standards throughout the period of the loan.
  • Stay current on financial obligations such as property tax and mortgage insurance.

Additionally, not all homes are eligible for a HECM loan. Homes over certain values, multi-unit complexes, and non-residential properties may not be considered for a reverse mortgage loan. For a full explanation of the qualifications for a HECM, be sure to visit our reverse mortgage eligibility page.

You can also learn more about HECM loans by downloading our free reverse mortgage guide, or start your reverse mortgage journey by speaking with one of our Reverse Mortgage Specialists.

Have More Questions About Reverse Mortgages

What is a home equity conversion mortgage (hecm)

If youre considering areverse mortgage, its important to understand what they are and whether or not they are right for you. With a reverse mortgage, you can receive money now in exchange for agreeing to give up your home equity over time.

Before you take out a reverse mortgage, speak with an attorney with experience in real estate law. If you have questions about applying for a reverse mortgage in Coral Springs, contact the Law Offices of Gary I. Handin, PA . Our experts will help you with all your mortgage questions.

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How Big Of A Hecm Loan Can I Get

The amount of your HECM loan will depend on your age, current interest rates, and your homes value. The maximum HECM loan amount in 2021 is $822,375.

One of the most advantageous characteristics of the HECM loan is that its credit line grows if you have a credit balance. For example, if you were to take a HECM line of credit for $150,000 and withdraw $20,000 the first year, youd have a balance of $130,000 left. However, the $130,000 grows at the same interest rate youre being charged on your loan balance. Lets say your interest rate is 5%. The following year, your new total credit line to draw from would be $136,500 .

Assuming there is no qualifying non-borrowing spouse, the loan must be repaid when the last remaining borrower dies or sells the home. At that time, the sale of the home repays the HECM loan. However, if your heirs would like to keep the home, they have the option to pay off the loan.

Disadvantages Of Hecm For Purchase

  • Over a period of time, the loan balance grows.
  • The possibility of no equity left in the home when the loan becomes due also needs to be taken into account.
  • After the loan is repaid, the borrower or their heirs will receive what is left of the equity in the home. Usually, there is minimal or no equity left in the home.

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Should I Only Take Out A Reverse Mortgage If Im Facing Financial Trouble

Financial emergencies are not the only reason to consider a reverse mortgage. I have many high-net-worth clients who use the reverse mortgage to buy their dream retirement home, Parker told LendingTree. It allows them to maintain liquid assets and keep their retirement expenses low.

Before taking out a reverse mortgage, most people should consult with a trusted financial adviser who doesnt sell reverse mortgages.

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